DESCRIPTION: Health care delivery in rural areas has increasingly become more difficult over the past decade. This is related to a number of economic factors and policy changes, including an economic downturn in rural areas, the enactment of the Medicare Prospective Payment System, a shift of patients to urban facilities, higher operating expenses for rural hospitals, and a rapidly evolving industry due to the managed care movement. Moreover, rural hospitals are less able to maintain a staff mix to meet the health care needs of an increasingly older population. Little is known about how rural hospitals coordinate their health care provision with post-acute and LTC providers such as nursing homes and home health agencies. In the face of increasing health care demands in an economically hostile and uncertain environment, rural hospitals have diversified to offer post-acute and long term care through the "swing- bed" program. Hospitals have also established formal ties with LTC providers through a strategy called "vertical integration," where the hospital transfers post-acute and LTC patients to LTC facilities under a formal or informal agreement. Previous research suggests that in rural areas, hospital and LTC links are difficult to establish. Yet it is these links that may be a key to providing cost effective, quality health care to the elderly and disabled who reside in rural areas. This application continues its focus on links between rural hospitals and LTC providers. The expressed aims of the proposed research are fourfold: 1) to develop descriptive data on the extent of linkages between rural hospitals and LTC providers, and the breadth of linkage types which occur between acute and LTC providers; 2) to examine the process of linkage development between acute and LTC providers in relation to "swing-bed" program participation; 3) to test hypotheses about the determinants of linkage structures using Resource Dependence Theory and Institutional Theory; for instance, it is hypothesized that rural hospitals experiencing high cost levels, high variations in cost levels, low Medicare margins, scarce resources and high environmental uncertainty are more likely to seek external linkages with LTC providers; and 4) to test hypotheses about the institutional consequences of linking structures for levels and variation in (a) average Medicare inpatient cost and revenue per admission; and (b) patterns of inpatient care (e.g., length of stay, services received, discharge destination); it is hypothesized that rural hospitals with more formal linkages to LTC providers will experience lower costs and smaller variation in costs than those with informal or no linkages.